Whalan v Chief Executive, Department of Lands
[1996] QLC 83
•7 June 1996
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BRISBANE
7 JUNE 1996
In the matter of appeal against valuation
Valuation of Land Act 1944
Valuation Roll No.: 91
Local Government:Albert
(V95-17)
PR & BM Whalan
v.
Chief Executive, Department of Lands
(Hearing at Coolangatta)
D E C I S I O N
This is an appeal under the Valuation of Land Act 1944 against the valuation of $190,000 placed on the subject land by the Chief Executive as at 30 June 1993. The single ground of appeal is that the subject land is used for "farming" as defined in s.17 of the Act, and therefore gains the protection of that section, the relevant parts of which are:
"17.(1)In making a valuation of the unimproved value of land exclusively used for purposes of a single dwelling house or for purposes of farming, any enhancement in that value for that the land has been subdivided by survey or has a potential use for industrial, subdivisional or any other purposes shall be disregarded irrespective of whether or not, in case of potential use as aforesaid, that potential use is lawful when the valuation is made.
(2)In subsection (1)-
`farming' means-
(a)the business or industry of grazing, dairying, pig farming, poultry farming, viticulture, orcharding, apiculture, horticulture, aquiculture, vegetable growing, the growing of crops of any kind, forestry; or
(b)any other business or industry involving the cultivation of soils, the gathering in of crops or the rearing of livestock;
if the business or industry represents the dominant use of the land, and -
(c)has a significant and substantial commercial purpose or character;
and
(d)is engaged in for the purpose of profit on a continuous or repetitive basis."
Mr. Peter Robert Whalan appeared for and gave evidence on behalf of the appellants, whilst the Chief Executive represented by Mr. GP Crowley, elected to not call evidence. There was agreement between the parties that should I find that the use of the land satisfies the definition of "farming" provided by s.17(2) of the Act that the land would be valued at $100,000 and, if not, the Chief Executive's valuation of $190,000 would remain.
The definition of "farming" has been considered in detail by the Land Appeal Court in Chief Executive v. Whackett (unreported 3 March 1995) and Thomason v. Chief Executive (unreported 3 March 1995) and it will be useful at this stage in this decision, to set out the tests provided in those cases in the form of four questions that need to all be answered in the affirmative for the definition of "farming" to be satisfied:-"1. Is the land used for the purposes of:
(a)the business or industry of a type specified (namely, grazing, dairying, pig farming, poultry farming, viticulture, orcharding, apiculture, horticulture, aquiculture, vegetable growing, the growing of crops of any kind, forestry); or
(b)any other business or industry involving an activity of a type specified (namely, the cultivation of soils the gathering in of crops or the rearing of livestock)?
2.Does the use of the land for the purposes of that business or industry represent the dominant use of the land?
3.Does the use of the land for the purposes of that business or industry have:
(a)a significant and substantial commercial purpose; or
(b)a significant and substantial commercial character?
4.Is the use of the land for the purposes of that business or industry engaged in for the purpose of profit on:
(a)a continuous basis; or
(b)a repetitive basis?"
Before reciting the material evidence, I need to say that I have jurisdiction to consider only that evidence relevant to the issue of farming, which became available up to the date of issue of the valuation, that is 30 May 1994. This is in the accordance with the authority of Walker v. Valuer-General (1978) 5 QLCR 128 at 131:-
"As it is relevant to my consideration of the evidence I should at this stage mention that my jurisdiction as to the use to which the subject lands are put is confined to the period commencing with the date as at which the value has to be found (31st March 1975) and finishing on the date as at which the Notice of valuation issued (28th October 1976). If a business of primary production commenced later than 28th October 1976 its effect, if any, on the unimproved value of the land is properly a matter for an application for revaluation in terms of section 13 of the Valuation of Land Act."
This reasoning was endorsed by the Land Appeal Court on appeal. ((1978) 5 QLCR 47 at 349).
The subject land is located at 91 Station Road, Bethania and has an area of 28.14 ha. The appellants have a long association with the land which was originally purchased by Mr. Whalan's parents in 1963 then on-sold to the appellants in 1973. Mr. Whalan had worked on the land on what he described as a "share basis" and then, once he moved into full employment, he continued to work on the land part-time, mainly assisting with tractor work. Up until the 1974 flood, the land was managed as a dairy farm however, the effect of the flood was financially devastating to the dairy, which was then closed. The operation was changed to rearing vealers, though the appellants moved out of permanent occupation of the land until 1977 when they returned to grow small crops for a period before moving into beef cattle in 1982. In that year they purchased a Braford bull and some registered Braford cows and commenced the operation of a stud which was registered with the Australian Braford Society. The appellants are members of that society and of the South East Queensland Braford Promotional Group and the stud is advertised in the Braford Annual publication. In 1993 a field day was held on the subject land and it appears that the appellants are active members of both the Braford Society and the Promotional Group. Mr. and Mrs. Whalan sold their first Braford bull at open auction in 1993, most bulls being sold out of the paddock though I am unaware of the number sold.
The subject property carries between 50 to 70 head, depending upon the season and Mr. Whalan said that little feed is purchased, the property producing adequate quantities of oats, rye, clover, lucerne, sorghum and improved pastures. The appellants bale hay and produce wrapped sorghum silage on a regular basis. The property is irrigated mainly from the Logan River but, in recent times, salt water intrusion in the river has necessitated the development of water storage on the land.
Mr. Whalan tendered a document prepared by his accountants. This document showed that in 1990 expenditure on the land totalled $13,425 and the sale of livestock produced an income of $7,856, leaving a net loss of $5,569. If I deduct from the total expenditure amounts from which the appellants derive personal benefit and expenses of a non-recurrent nature (electricity $268, rates $1088, telephone $427, equipment $2,010) the net loss is reduced to $1,776. The 1991 figures are: total expenditure $20,352; net figure following deductions of the same type referred to above, leaves a net expenditure of $11,459; sale of stock $4,009, leaving a net loss of $7,450. The 1992 figures are: total expenditure $19,328; the net figure following deductions (including that $1830 for a dam) leaves a net expenditure of $15,335; sale of stock $6,142, leaving a net loss of $9,193. The 1994 figures are: total expenditures $17,620; the net figure following deduction leaves a net expenditure of $10,354; the sale of livestock $9,817 leaving a net loss of $537. I should explain that whilst for taxation purposes it would be appropriate to take into account the items that I have deducted above (and others such as depreciation) I doubt that this would be the case in taking a practical commercial view of the business conducted on the land. This is not to say that the deductions that I have made, or not made for that matter, will provide much precedent value as they did not result from submissions made or evidence provided, but rather from my own view of what is practical and doing the best I could from the evidence. I now turn to the submissions.
Mr. Whalan argued that the word "exclusive" which appears in s.17(1) of the Act applies to the phrase "single dwelling house" only and not to the phrase "for purposes of farming". I cannot accept this submission as in Thomason the Land Appeal Court held, in effect, that the land is used exclusively for the purposes of farming if it satisfies the definition of "farming" supplied by s.17(2). It follows that even if I were to accept Mr. Whalan's submission on this point that I would still need to address the central question and that is whether the activities and facts described in my recitation of the evidence above are sufficient to satisfy the definition of "farming" supplied by the Act. If the definition is satisfied then it matters not that some other use is made of the land as long as the conduct of the business in question represents the dominant use of the land.
Mr. Whalan referred me to s.3 of the Primary Producer's Co-operative Association's Act 1923 which provides a definition of "primary producer". It may well be the case that the appellants satisfy that definition, however, that is not a matter of relevance in addressing the question of the definition of "farming" supplied by another statute, namely the Valuation of Land Act.
Mr. Whalan said that given that the Commissioner for Taxation accepts the appellants as conducting a business of farming; that the appellants have a Department of Primary Industries property number, a diesel sales tax exempt number, another sales tax exempt number and are required to lodge an agricultural census each year by the Australian Bureau of Statistics, that these are matters which go to answering the question as to whether the land ought to be valued as farming land under the Valuation of Land Act. All of these matters are relevant in answering the question as to whether the appellants are carrying on a business of cattle grazing on the subject land as I will hold, they are. They are not however, determinative of the question as to whether the definition of "farming" has been satisfied. Mr. Crowley for the Chief Executive submitted on one point only, that submission being that the business carried out on the subject land does not have "a significant and substantial commercial purpose or character".
In Thomason the Land Appeal Court said that in considering the question as to whether the business carried on on the subject land "has a significant and substantial commercial purpose or character" there must be evidence that:"(a)the business or industry is being carried on with a genuine and sizeable intention or desire that there will be reward, if not profit and is not being engaged in merely for recreational or some other purpose; or
(b)the qualities or distinguishing features of the business or industry demonstrate that it is being carried on in a way which (ordinarily, at least) will generate reward, if not profit."
In regard to what type of evidence would be sufficient to satisfy the tests posed in this Thomason quote, the majority in Whackett applied a standard which might be described as high, even demanding, which imposes on the appellant an obligation to adduce clear evidence sufficient to provide an affirmative answer to the tests posed.
"In our view neither the objective character nor the subjective purpose of the grazing enterprise can be said to be significantly and substantially commercial.
We emphasise, however, that we arrive at this conclusion on the facts presented in this case. There is insufficient evidence to find in favour of the owners. No books of account or trading figures of any kind were presented. Before us both parties relied on the verbal evidence of Mr Whackett in the Court below that these lands carry 70 head of mixed cattle on a year to year basis, that for the three years to 1992 they sold approximately 25 head of cattle per year and that he estimated their average recent gross return at $5,000 per annum. He also stated that the maximum carrying capacity is 70 head of cattle and it would be necessary to run more cattle to make any profit.
No explanation was given as to why an enterprise running 70 head of cattle, 40 of which were breeders, had such a small return for the last three years. It may well have been because of the drought conditions which have affected so much of the State, but no evidence of that was forthcoming.
We are of the opinion that an enterprise which can run 70 head of cattle may be shown to have a significant or substantial commercial purpose or character. However, that has not been demonstrated to our satisfaction in this case. It may well be that at some future time, when the details of the Whacketts' business activities are presented in more detail, the matter could again be considered, with quite different results."
During cross-examination Mr. Crowley asked Mr. Whalan about the profitability of the business carried out on the subject land:
"Can you tell from this or any other information you know of that you have actually made a profit in any of those years?-- So far as this farm is concerned we haven't had a profit, we've been expanding, we've been spending the money that we make plus more. It is to be remembered that in the last few years we've had a hell of a run with drought and the rest of it, we've been battling for quite a few years.
Do you think it is likely then that you'll make some sort of substantial profit from the property?-- We certainly hope so. That's one of the reasons why we've gone into stud breeding to try and get to a market where we can get a price for our product."
I have considered what Mr. Whalan had to say and have closely studied the evidence provided by his accountants, doing the best I can with that to produce what I would term a practical commercial result. I do not doubt that the appellants are dedicated to the business carried on on the subject land, nor do I doubt Mr. Whalan's sincerity concerning his hopes that a profit will emerge from that business in due course, but having regard to the standard of evidence required as indicated in Whackett, I need something more in the way of evidence to show that the fledgling business has a real prospect of producing reward or profit.
The business carried out on the subject land cannot be described as nominal, token, or illusory if I am to borrow the words of His Honour Ambrose J in the minority decision in Whackett, but nor is the evidence indicative that the undertaking has substantial commercial characteristics. It has the characteristics of consuming labour, effort and finances of those who have a strong connection with the land and an apparent love of it and a desire to produce from it, however, the hurdle expressed in the law has been set at higher level than this. Mr. Whalan may be described as carrying on farming according to the everyday use of language, however, I find that I do not have evidence which could lead me to conclude that his activities constitute "farming" as is described in s.17(2) of the Valuation of Land Act. The appeal is therefore dismissed and the valuation of the Chief Executive in the amount of One Hundred, Ninety Thousand Dollars ($190,000) is affirmed.
RP SCOTT
MEMBER OF THE LAND COURT
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